What is the CDHR, and why does it exist?

First introduced by the 2025 Finance Act and renewed for 2026, the Contribution Différentielle sur les Hauts Revenus (CDHR) — France’s high-income differential contribution — has become one of the most structurally significant tax measures for high-net-worth households. Yet it remains widely misunderstood: many taxpayers confuse it with the longstanding Contribution Exceptionnelle sur les Hauts Revenus (CEHR), introduced in 2012, or are unaware of the advance payment obligation that makes it a concrete operational constraint as early as December.

The CDHR addresses a straightforward problem: some very high-income households benefit from tax reduction mechanisms, specific exemptions, or income that is structurally lightly taxed — such as dividends and capital gains taxed at the flat rate (PFU) — resulting in an effective tax rate below 20%. The CDHR closes that gap. It does not replace the IR or CEHR — it is added on top of them.

Who is affected? Approximately 16,000 households in France. The thresholds are €250,000 RFR for a single taxpayer (widowed, separated, or divorced), and €500,000 for a married or civil-partnered couple filing jointly. Beyond these thresholds, the contribution applies only if the effective tax rate remains below 20%.

The calculation: a three-step mechanism

The CDHR compares two figures: the theoretical minimum tax (20% of the adjusted RFR, potentially reduced by degressive relief for taxpayers just above the threshold) and tax actually paid (IR + CEHR + flat-rate increases). If the difference is positive, that is the CDHR owed.

Since the 2026 Finance Act, the CEHR on exceptional income taxed at the PFU is only counted at 25% in this calculation — making the CDHR significantly more impactful for taxpayers who have realised large capital gains or received substantial dividends.

The December advance payment: the key operational constraint

What sets the CDHR apart from a simple additional tax line on an assessment notice is its mandatory advance payment. Between 1 and 15 December 2026, affected taxpayers must pay an advance equal to 95% of their estimated CDHR. This requires having, by early December, a reliable projection of all income for the year — including variable income, distributions from pass-through entities, potential capital gains, and investment returns that are often only finalised late in the year.

If the advance paid falls more than 20% short of 95% of the CDHR actually due, a 20% surcharge applies on the shortfall. This can be significant for taxpayers with volatile or deferred income streams.

Which profiles are most exposed?

The CDHR primarily targets situations where high income is lightly taxed. Four categories are particularly affected:

What changed with the 2026 Finance Act

The 2026 Finance Act brings two key adjustments. First, the reduction of the CEHR credit for PFU-taxed income from 100% to 25%. In 2025, CEHR on dividends and gains taxed at the PFU was fully offset against the CDHR calculation. From 2026, only 25% of that CEHR counts. For a taxpayer who received €500,000 in dividends at the PFU rate, the additional CDHR exposure can run to tens of thousands of euros.

Second, the open-ended extension. In 2025, the CDHR was presented as temporary. The 2026 Finance Act ties it to the return of France’s public deficit below 3% of GDP — a threshold France has only met twice in the past fifteen years (2017 and 2018). In practice, the CDHR is now a permanent feature of the French tax landscape.

Adaptation strategies

1. Begin revenue modelling in September. The December advance payment requires clear visibility over full-year income. Any transaction generating taxable income in 2026 — disposals, distributions, bond redemptions, PEA exits — must be planned in advance with your adviser to assess its CDHR impact.

2. Balance dividends and salary. For shareholder-directors, increasing the salary component raises the effective tax rate above 20%, mechanically neutralising the CDHR — at the cost of higher social contributions. The right balance depends on the household’s overall situation.

3. Defer certain transactions to the following year. If a major disposal or distribution is planned, deferring it to 2027 may be worthwhile if next year’s fiscal position is more favourable (reduced other income, change in family circumstances).

4. Use property investment to fine-tune the effective rate. Certain real estate investments — the new Jeanbrun regime, Malraux, Historic Monuments — generate taxable rental income, but the associated depreciation or charges can fine-tune the effective tax rate without dropping below the CDHR threshold.

5. Review the impact of international tax treaties. For French residents with foreign-source income, the treatment of that income within the CDHR calculation warrants specific analysis. Some treaties result in a higher effective rate than purely domestic income; others may increase exposure.